Climate Change’s Impact on the Semiconductor Industry Extends Beyond Taiwan
Reservoirs are running low. Rice fields are allowed to go fallow. This is not supposed to happen in Taiwan, a subtropical island with an average rainfall of 2777mm (109 in.) per year. Yet, in the first 5 months of 2021, Taiwan received only 457.5 mm (18 in.) of rain. Despite heavy rains that fell in June, Taiwan is now facing the prospect of one of its driest years since 1979.
This unprecedented drought is a cause for concern for the people of Taiwan, as well as for the broader global economy. Taiwan’s drought coincides with a time when industries globally are experiencing production difficulties due to a shortage of semiconductors.
Taiwan’s drought and the semiconductor supply crisis come when, because of supply chain concerns and political issues, there is a movement to build new fabs in a variety of locations around the world, but especially in the South Western states of the USA.
What about these other locations? How vulnerable to drought are they? As climate volatility and risk increases, this article will look at the potential for drought in some major semiconductor manufacturing centers. Upshot: there is cause to be concerned.
Water and the semiconductor industry
Taiwan is an outsized force in the semiconductor industry, with just one Taiwanese company, TSMC, having accounted for 56% of global outsourced semiconductor revenue in the first quarter of 2021 (TrendForce via the Wall Street Journal). While TSMC and other Taiwan-based manufacturers produce their chips in a number of semiconductor fabs around the world, the concentration of fabs in Taiwan means that if the drought continues, it could make the semiconductor shortage even more acute.
Drought is a cause for concern in the semiconductor industry simply because water is an important component in semiconductor production. While the industry is reducing its water use through techniques such as recycling water, purified water is necessary to both clean silicon wafers as they go through the semiconductor manufacturing process and to cool down equipment. For example, in 2015, Intel as a whole consumed a little over 37¹² liters (9.8¹² gallons). It is worth noting that 15.5¹² liters (4.1¹² gallons) of that water was recycled. By comparison, London uses over 9.5¹¹ liters (2.5¹¹ gallons) of water in a year.
A shortage of water for manufacturing is not the only way a drought could adversely affect semiconductor manufacturing, it could also affect the power supply for fabs. In areas that rely heavily on hydroelectric power, a drought could significantly reduce the amount of available inexpensive clean power. The high temperatures associated with a drought could also put additional pressure on the grid due to an increased demand for air conditioning and other types of cooling as well as wildfires that damage distribution lines, leading to blackouts and brownouts. These can have severe consequences for operations. Semiconductor fabs typically have backup power facilities on site but the amount of power they can provide is limited. When an NXP fab in Texas lost power on February 15, 2021 due to extreme cold weather, it took a multi-day process to bring the fab back online.
The combination of climate change, population growth, and the growth of various water-intensive industries, is stressing water supplies throughout the world. The June 2021 heat dome event in the Pacific Northwest area of the U.S. and Canada, where temperatures reached 49 degrees C (121 degrees F) in British Columbia, shows the potential for climate change to completely upend climate trends seen over the last century, adding even more pressure on water supply systems designed for a climate that we may never see for some time.
The water usage of semiconductor fabs are increasingly becoming an issue in the communities where they are located as multiple stakeholders compete for available water. One example is the U.S. state of Arizona where Intel, NXP, STMicroelectronics, and other semiconductor manufacturers already have fabs and new ones continue to be proposed. Since Arizona is a desert state (more on Arizona below), the proposed new fabs continue to bring up questions about their sustainability in Arizona’s arid climate.
Precipitation trends in semiconductor manufacturing hubs
Semiconductor fabs are scattered throughout the world. To get some idea of the potential risk of climate change-driven drought to the industry, we took a look at historical precipitation trends as shown in the ERA5 dataset (from the European Centre for Medium-Range Weather) in some regions where semiconductor fabs are concentrated. While historical trends do not necessarily reflect the future, we think they can help show potential risks should climate change continue to push dry trends into full-blown droughts.
Taiwan: As mentioned above, given Taiwan’s outsized role in the industry, the lack of rainfall in the first part of 2021 has given pause to industries worldwide. While Taiwan is generally considered to have abundant precipitation, looking over the historical data, there has been a steadily decreasing number of rainy days since 1979 (days where precipitation was below 0.01 mm — 0.0004 in — a day).
There was a dry period in Taiwan from 2002 to 2003 with average yearly precipitation dropping to 2241 (88 in.) and 2076 mm (82 in), but it followed a particularly wet period. The dry spell in 2021 is different. It follows a year of lower than average rainfall with 2019 mm (79 in) falling in 2020. Given the long term trend of decreasing precipitation and the now demonstrated risk of sharp drops, Taiwan’s history of high amounts of precipitation can’t be guaranteed to continue in the future. Water should now be a major concern for Taiwan’s semiconductor industry.
To understand the real impact of dry years we look into 6 month rolling averages as this way we can see if there was just a bit lower precipitation in the year or there was months of dry conditions.
Eastern China: The dry weather conditions affecting Taiwan are not limited to the island. They also have been an issue for much of Eastern China. While the drought in Eastern China hasn’t gained as much attention in the technology industry as the Taiwanese drought, this area also is also a major semiconductor manufacturing hub.
We looked at the historical precipitation patterns for several regions in the area with significant numbers of semiconductor fabs, Beijing, Tianjin, Shanghai, Shanghai, Fujian, Guangdong, and Guangxi. While there are variations by location, on the whole the regions show a significant overall drop off in precipitation starting in the 2000s. This is especially true in 2021 with Shanghai, Fujian, Guangdong, and Guangxi facing a year where precipitation rates are in the range of the lowest 5% or less of years since 1979 (for historical precipitation data for each location, please refer to graphic 4 and select the desired location in the legend). Comparatively, Beijing and Tianjin are better off but both of these regions are coming off of a dry 2020. An article from February 2021 indicates that Zhejiang (a province between Shanghai and Fujian) is facing water shortages and by the end of June much of the region was facing a severe power shortage due to a heat wave.
Singapore: Like Taiwan, Singapore is considered to have a wet climate. Unlike Taiwan and Eastern China to its north, Singapore is having a relatively good precipitation year in 2021. Still, the country has suffered periods of low precipitation in the past, notably one that ended in 1984, also in 1997 and lesser droughts in 2002 to 2006, 2009, 2014, and 2016. With the major semiconductor manufacturer GlobalFoundaries investing $4 billion in a new fab in Singapore, the water situation will be one to watch.
South Korea: While South Korea doesn’t have as high of an average precipitation rate as its neighbors to the south, it still can be considered a relatively wet country. While 2021 is looking to be a normal precipitation year for South Korea, from 2014 to 2020 they did go through a period when it was drier than usual.
Mie, Japan: TSMC has publicly stated they are considering building a new fab in Japan and Mie, with a high concentration of fabs, would be a natural candidate for a location. Mie also has a relatively high amount of annual precipitation, but it has seen several dry periods since 1980. At this point, none of them have lasted long enough to have been seen as particularly worrisome.
Kumamoto, Japan: Kumamoto is another semiconductor fab hub. Much like Taiwan and Western China, Kumamoto also has a relatively high precipitation rate. In the same vein, 2021 has also been a dry year so far for Kumamoto, falling into the top 7.5 % of dry years for that location. Kumamoto is coming off of a wet period so it shouldn’t be an issue — yet.
Oregon, USA: Intel has a large fab presence near Portland, Oregon’s largest city. The eastern region of Oregon has a relatively high precipitation rate, but 2021 so far is a dry year for Oregon as a whole. With the June 2021 record heat wave in the Pacifc Northwest, all of Oregon is considered to be in some stage of drought. It looks like this year will be a particularly difficult one both in precipitation and the heat’s effect on the power grid. Already fires in Southern Oregon threaten a major electrical grid link to California. Since 1986, Oregon has seen more spikey periods of lower precipitation with extended dry spells from 1986 to 1995 and 2001 to 2002. There is reason to be pessimistic about future precipitation with the ICF Climate Center predicting that temperatures in Portland could exceed 38 degrees C (100 degrees F) 3 to 4 times a year by 2050.
Arizona, USA: Arizona is a desert state with a corresponding low average precipitation rate, but it is also home to a growing semiconductor industry. As the United States looks to strengthen its semiconductor manufacturing base, both Intel and TSMC have announced new fabs in the state. 2021 is a dry year so far with only 27.5 % of the years since 1979 having been as dry as 2021. 2019 and 2020 have been dry as well so as of the end of July, 2021 most of Arizona is in either severe or extreme drought. The drought is affecting much of the Western United States and the Colorado River, a major source of water for Arizona, expected to be declared in a state of water shortage by the U.S. Federal Government.
Texas, USA: Texas has a number of fabs and Samsung is reported to be considering building a new fab in the state. While Texas has so far avoided the drought affecting much of the Western United States, 2021 is still a fairly dry year falling into the top 37.5 % of dry years. Texas has been known to have droughts in the past. In 2011 to 2012, Texas had a particularly dry year which took some time to recover from.
Reasons to be concerned
In many of the locations we have looked at with semiconductor manufacturing hubs, it is apparent that many of them, even those with historically high precipitation rates, have had times of low precipitation that were extreme enough to be of concern. It is hard to come to generalizations that run across the different localities since each area has specific situations around water, not in the least around the state of water storage. What we can say is that so far in 2021, the Northern Hemisphere has seen waves of extreme heat events and droughts in a number of locations including some of the ones mentioned above. While each heat event may not be directly attributable to climate change, it has been shown that climate change can directly affect their intensity — turning what might have been merely a concerning event into a dangerous one. The semiconductor industry has to be added to the many other industries that need to be concerned about water in our warming world.
